Finnair Expects Significant Loss After Competition Intensifies

Aug. 15 (Bloomberg) -- Finnair Oyj predicted a
“significant loss” for the full year after second-quarter
earnings declined as increased competition on long-haul routes
and a stronger euro weighed on sales.

The airline had a net loss of 24 million euros ($32
million) compared with profit of 17.9 million euros a year
earlier, the Helsinki-based company said today in a statement.
Revenue declined 7.2 percent to 565.7 million euros.

“The impact of the weak economic prospects in Finland on
domestic demand and intensified international competition,
particularly in long-haul traffic,” hurt sales, Chief Executive
Officer Pekka Vauramo said. Expenses paid in U.S. dollars and
revenue in Japanese yen also took a toll as the euro
strengthened.

An uncertain economic outlook for Europe and Asia weakened
demand, the company said. The 18-nation euro bloc posted zero
growth last quarter as its three biggest economies failed to
expand. Restructuring at the carrier’s aviation service unit and
the sluggish performance of its tour operator Aurinkomatkat
Suntours also hurt results. Finland’s biggest airline is looking
to trim annual costs by 200 million euros this year.

Finnair shares fell 2.8 percent to 2.45 euros at 11:54 a.m.
in Helsinki, taking the decline to almost 12 percent this year
and giving the airline a market value of 314 million euros.

Outsourcing

The carrier, which is 55.8 percent state-owned, had about
5,800 employees at the end of last year, down from about 9,660
in 2007. It has terminated positions and outsourced functions
including catering, engine services and ground handling.

Finnair said today that it plans to outsource cabin
services on as many as three routes this year and a total of
about 20 routes within the next two years.

With 115 flights a week over Siberian airspace, the carrier
also has more to lose than other carriers should Moscow elect to
curb flights. Finland’s Transport Ministry said on Aug. 12 that
it’s conducting studies into potential effects of an airspace
shutdown as Russia threatens to widen its retaliation against
the European Union in a tit-for-tat sanctions dispute.